Asian markets sank Wednesday on renewed concerns about the China-US trade talks after Washington lawmakers passed a bill supporting Hong Kong civil rights, a move likely to spark anger in Beijing.
The vote by the senate came as investors were already growing nervous about the lack of solid news on negotiations for a mini tariffs pact to help resolve a debilitating and long-running standoff between the economic superpowers.
China was already angered and expressed “strong indignation” last month when the US House of Representatives passed a similar measure.
The bill, which must be signed off by Donald Trump, supports “human rights and democracy” in Hong Kong and threatens to revoke its special economic status as lawmakers grow concerned about an increasingly tough crackdown on the months-long protests.
It would require the president to annually review the favorable trade status Washington grants to the city and allows for sanctions against Hong Kong and Chinese officials who commit human rights abuses including “extrajudicial rendition”.
While observers broadly expect the two sides to eventually hammer out some sort of agreement as part of a wider pact, there have been a number of bumps in the road, causing anxiety on equity markets.
And Vice President Mike Pence warned Tuesday that the Hong Kong situation could complicate any deal.
However, AxiTrader’s Stephen Innes said Trump “has been conspicuous by his silence when it comes to the Hong Kong chaotic escalation. Perhaps Trump sees a trade deal with Beijing as a more significant priority as he makes his case for re-election and doesn’t want the Hong Kong bill to act as a stumbling block”.
But he added that the passage of the bill would make it hard for him to “hold out against this bipartisan pressure, which could put another snag in the trade talk lines”.
Adding to the unease, Trump again raised the specter of more levies on Chinese goods, warning Tuesday: “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”
In early trade Hong Kong was down 0.8 percent and Shanghai fell 0.2 percent, while Tokyo finished the morning session down 0.7 percent
Singapore shed 0.5 percent, Seoul sank 0.9 percent and Taipei lost 0.3 percent. Manila and Jakarta also fell.
Sydney dropped more than one percent as financials were hammered by news that banking giant Westpac had been accused of “serious and systemic” breaches of money-laundering laws involving more than US$7 billion.
Australia’s financial intelligence agency said it had taken legal action against the lender for its failure to report more than 19.5 million international fund transfers, including “high-risk transactions” to Southeast Asian nations potentially linked to child exploitation.
Oil prices were flat after suffering a hammering on Tuesday because of worries over the trade talks as well as signs of a further build in US inventories
“Crude is essentially being held hostage by the on-again, off-again US-China efforts to forge a partial deal,” said Vandana Hari, of consultant Vanda Insights. “The oil market has drawn a straight line between a trade deal and oil demand growth.”